As institutional investors prepare to officially enter the cryptocurrency market, the New York Stock Exchange may soon list Bitcoin futures contracts. ‘There Is a Trend Here We Can’t Ignore’ Earlier this week, the New York Stock Exchange’s parent company, Intercontinental Exchange Inc., agreed to acquire the 136-year-old Chicago Stock Exchange. Now, the financial institution may have its eyes set on Bitcoin. As reported by Bloomberg, Intercontinental Exchange Inc. has indicated that Bitcoin and cryptocurrency futures<br />Read More<br />The post ICE Chief: ‘We Can’t Ignore’ Bitcoin Trading appeared first on Bitcoinist.com.
Blockchain startups in China now have a new source of funding they can tap into.
Today, April 9, 2018, the Xiong’An Global Blockchain Innovation Fund launched with $1.6 billion (10 billion yuan) to funnel into promising Chinese blockchain startups. The announcement took place during the grand opening of the Hangzhou Blockchain Industrial Park in China. The industrial park, which will also serve as an incubation center for the startups, is located in one of the biggest tech hubs in China, Hangzhou city in Zhejiang province, home to e-commerce giant Alibaba.
The Xiong’An Global Blockchain Innovation Fund was jointly funded by the Yuhang District Government, the Future Science and Technology City Administrative Committee, and the Hangzhou Yanqi Investment Management Co. “Government-guided funds” accounted for 30 percent of the investment, according to a report in Sohu.
Xu Xiaoping, one of China’s most celebrated angels investors, will serve as the fund’s advisor. Xu is the founder of ZhenFund, a venture capital firm that has invested in blockchain projects such as Stream and Lino. Li Xiaolai, a prominent Chinese Bitcoin investor and well-recognized figure in the cryptocurrency space, will manage the fund.
The fund’s announcement and the opening of the industrial park further establish Hangzhou as a rising center of blockchain technology in China. The government in Hangzhou has attached great importance to blockchain technology, ranking it just behind artificial intelligence and virtual reality technologies.
Notably, the announcement of the fund arrived just weeks after the government-affiliated Investment Association of China (IAC) rescinded its plans to establish a blockchain-funding center due to internal structural conflicts.
Several companies have been making a bid to support blockchain technology in China. In February 2018, Alibaba rival JD.com announced plans to launch a new Beijing-based accelerator program for artificial intelligence and blockchain startups. And in September 2017, the state-owned Bank of China (not to be confused with the People’s Bank of China, the country’s central bank) filed a patent application for a process for scaling blockchain systems.
Despite a spate of enthusiasm to delve into the blockchain space, all of these companies will have to deal with the regulatory uncertainty in the country. In efforts to stem capital outflow and corruption, China has been increasingly clamping down on cryptocurrencies, initial coin offerings (ICOs) and cryptocurrency exchange trading.
This article originally appeared on Bitcoin Magazine.
While most of the early buzz around Bitcoin centered on it as a new, fast, cheap and permissionless method of online payment, the focus has moved from medium of exchange to store of value over the past few years. It’s clear that bitcoin is useful for censorship-resistant payments that may not otherwise be possible without this new technology, but much more of the recent hype has been around tracking the price more than anything else at this point.
Although general activity on the Bitcoin network has continued to rise, a recent report from blockchain analytics firm Chainalysis shows that a growing percentage of this activity is related to trading on exchanges.
There are a variety of reasons as to why the average person on the street is not interested in using bitcoin for payments. For example, the user interfaces are still hard for non-techies to use, network congestion leads to high fees, and price volatility is not something people are used to dealing with in their wallets (at least in most developed countries).
On top of that, one other key issue is often overlooked: capital gains taxes.
Who’s Reporting Capital Gains Taxes on Purchases Made via Bitcoin?
In the United States and many other countries, capital gains taxes must be paid every time an individual uses some of their bitcoin stash to make a purchase, as long as the bitcoin price has gone up since those bitcoin were first acquired.
For example, let’s say someone buys 1 bitcoin when the price is $1,000. This person simply holds that bitcoin for a couple of years, and then it is eventually worth $10,000. If this person goes to the store and purchases a television for $500, they’re effectively selling a portion of their bitcoin holdings at a profit. These gains are supposed to be taxed.
When you imagine this person earning bitcoin on a regular basis and buying something as small as a meal or a coffee every day, it becomes easy to see how keeping track of everything would be quite cumbersome, especially when bitcoin wallets offer pretty much zero assistance in this area at this time.
Even if the buyer and seller involved in a transaction are both bitcoin enthusiasts, it wouldn’t make much sense to make a deal denominated in bitcoin; the tax headache is not worth it.
Instead, it makes much more sense for individuals in places like the United States to simply convert $1,000 or so worth of their bitcoin holdings to the local currency by way of a bitcoin debit card for spending every now and then.
It’s unclear how many people have effectively become tax evaders by accident because they’re spending their bitcoin gains without reporting them. Obviously, those involved in illicit activities tend to be less concerned with the tax implications of using bitcoin for online payments because they’re already attempting to hide these transactions from the authorities anyway.
The Cryptocurrency Fairness Act
So what’s the solution to the usability issues caused by capital gains taxes? One might be through a change in tax law, at least in the United States.
The Cryptocurrency Tax Fairness Act introduced in Congress last year would exempt bitcoin transactions under $600 from capital gains taxation. This means bitcoin users would only have to calculate the tax implications of their bitcoin payments if they’re in amounts greater than $600. Notably, this is the same exemption that already applies to foreign currencies.
The passage of this act would do wonders for the usability of bitcoin for payments by Americans.
Hedging Options Could Also Help
Another useful tool for avoiding tax-related usability issues with bitcoin may be hedging options in wallets. This is already available with Abra.
The basic idea is that you hold bitcoin in a smart contract hedged to U.S. dollars or any other currency to avoid bitcoin’s price volatility. This setup would be useful for anyone who is interested in using bitcoin for payments but not necessarily gaining exposure to the price swings of the cryptoasset.
If someone can hold bitcoins as U.S. dollars, they no longer have to worry about gains or losses whenever they make a transaction; however, they also lose access to the store-of-value properties of bitcoin in this situation.
This article originally appeared on Bitcoin Magazine.
Cryptocurrency investigation enterprise Chainalysis is releasing a product called Know Your Transaction (KYT) designed to help businesses track customers that may be involved in illicit cryptocurrency-related activity. The company’s clientele includes the Federal Bureau of Investigation (FBI), the Drug Enforcement Administration (DEA) and Europol.
Per a recent blog post, Chainalysis stated that it holds a lot of faith in both cryptocurrencies and blockchain technology:
“Blockchains create new ways for people to build trust among themselves and transact using cryptocurrencies. Cryptocurrencies have, in turn, inspired people to reimagine the financial machinery that powers world commerce. People are collecting land in virtual realities, conducting real-time payments for computation services, and buying collectible cats on the internet. This is just the beginning of worldwide access to financial instruments.”
The venture’s primary goal is to get banks involved in the cryptocurrency scene and to create a world where financial institutions can offer their services to digital currency exchanges and ventures, but alleged fears of money-laundering make this somewhat tricky, which explains the reasoning behind the product’s release.
Chainalysis’ KYT provides “real-time feedback” on transactions and fuels relevant information into what the company calls exchanges’ “transaction processing engines,” so executives can raise alerts regarding risky customers and monitor suspicious activity. The product has been in a testing phase amongst a small group of select customers, who reported seeing a “20X improvement in the speed of account reviews.” KYT will now be released to global cryptocurrency exchanges and financial institutions.
In addition, the company is also introducing multi-currency support. Chainalysis will start with bitcoin cash for its law enforcement customers and is looking to expand to 10 cryptocurrencies by the end of 2018.
Chainalysis recently landed approximately $16 million in series A funding from venture firm Benchmark, whose only other cryptocurrency-related investments include Pantera Capital and Xapo back in 2014.
General partner Sarah Tavel, who led the deal with Chainalysis, explained that the move was a smart choice, and called Chainalysis a “meat and potatoes” company:
“All these regulated institutions want to participate [in cryptocurrency transactions], but they need to understand with whom they are transacting and where their funds are originating. We’d solved these traditional compliance requirements in the fiat world.”
Chainalysis was founded in 2014 by Oxford economist Jonathan Levin and Michael Granger, the former COO of San Francisco-based bitcoin exchange Kraken. The company employs over 75 people and boasts offices in New York, Washington D.C. and Copenhagen.
Chainalysis rose to fame after it was selected to investigate Japan’s Mt. Gox debacle, which saw roughly half a billion dollars worth of cryptocurrency disappear practically overnight. The reported mastermind is an alleged Russian cybercrime suspect who was arrested in Greece last summer.
Chainalysis isn’t alone in this space. London-based Elliptic, which also runs investigations relating to cryptocurrencies, has garnered over $7 million in funding from institutions like Banco Santander bank and Octopus Ventures to further expand its operations and product development team.
This article originally appeared on Bitcoin Magazine.
Basecoin developer Intangible Labs raised $125 million in a SAFT sale, SEC filings show.
A class action lawsuit has been filed against Nano and key members of its core team for allegedly violating federal securities law.
In February 2018, the Italian cryptocurrency exchange BitGrail lost $170 million worth of the Nano currency “XRB” due to a “hack” which has now led to a class action lawsuit represented by the Silver Miller law firm. The firm bills itself as a cryptocurrency investor law firm and currently has actions pending against the Coinbase, Kraken, BitConnect and Cryptsy exchanges as well as lawsuits against pre-functional token ICO promoters Monkey Capital and Giga Watt. Nano was originally known as RaiBlocks and changed their name to Nano in January 2018.
The lawsuit alleges that, in their push to introduce XRB to a wide market of investors, Nano and key members of its core team recklessly directed investors to open accounts and place assets with the small and troubled BitGrail exchange, where the $170 million allegedly “disappeared” in February 2018.
In the complaint, it is alleged that the Nano team engaged in an unregistered offering and sale of securities that violated Section 5, 12(a) and 15 of the Securities Act of 1933 and wrongly directed investors to BitGrail. The lawsuits request that the court rescind the plaintiff class’ investments in XRB and require Nano to “rescue fork” the missing XRB into a new cryptocurrency to compensate the victims for their losses.
The action is being brought by Alex Brola through the law firm, the defendants named in the complaint are Nano the company as well as Colin LeMahieu, Mica Busch, Zack Shapiro and Troy Retzer. The complaint notes that, of the over 130 million XRB tokens that were generated, the defendants withheld millions, if not tens of millions for themselves, the bulk of which are owned by LeMahieu. It is asserted that the defendants promoted the use of and assisted customers in getting accounts at the BitGrail exchange, where the XRB/BTC trading pair resulted in over 80 percent of their trading volume.
The defendants promoted BitGrail as a safe and reliable exchange for XRB holders. The defendants consistently and publicly endorsed and supported BitGrail, despite many complaints. Nano attracted investors with a feature set that was described as instant transactions with no fees and virtually limitless scalability. In addition, there would be no mining as all tokens already existed and no more would ever exist. The full 26-page complaint was filed in the Eastern District of New York and can be read here.
This article originally appeared on Bitcoin Magazine.
“Ever heard of tulips?” It’s a question anyone who is publically involved in the cryptocurrency space has been asked multiple times. With the enormous gains in value the industry has seen, many observers come to the same conclusion. It’s a bubble.
The take is not a terrible one and many experienced cryptocurrency traders agree with the sentiment. Bubbles have come to be an expected occurrence in the space. The difference in opinion comes when deciding whether the “pop” will be a minor setback or the final conclusion in an exciting but short-lived ride.
On one side are the supporters of cryptocurrency. Their motivations can be boiled down to two points: desire for profits and a belief that the technology will benefit humanity. They believe that bubbles are a natural phenomenon in price discovery and an inevitable part of the long-term upward trend in value that will occur as cryptocurrencies become more utilized. They also understand that, while bubbles can hurt some traders in the short term, they are a necessary evil in the development of a technology which stands to dramatically increase human financial freedom. Sometimes these motivations can seem at odds, but in general they coexist within the community.
Get rich making the world a better place. It’s an attractive pitch.
On the other side are the skeptics. Doubt in cryptocurrency has made strange bedfellows of a band of commentators as diverse as it is vocal. Nobel prize economists, billionaire bankers, goldbugs and central banks have all weighed in to signal their prediction of the industry’s inevitable demise. And with the spotlight of increasing coin valuations has come even more doubters. In the age of Twitter, it’s almost essential that you have an opinion on the matter and that you let the world know it. For detractors, the tulip meme often comes into play:
For skeptics as much as believers, there is a personal economic motivation. While they may not have cashed in on the extraordinary rise of cryptocurrencies, they think the game is rigged from the start. By keeping their hard earned cash out of the market, they are saving themselves from an “inevitable” crash to zero.
But under this current of self-preservation is an ethical play opposite to that of cryptocurrency supporters. Many detractors believe that this technology is not just ridiculous but actually harmful to society. What drives this outlook? The true history of the tulip bubble can give us an interesting view of the motivations driving their sentiment.
An Early Mania
Tulip Mania is the go-to story whenever someone wants to talk about humanity’s penchant for irrational exuberance in financial markets. It’s the catchy name for the extraordinary rise in value, and subsequent crash, of Dutch tulip bulb valuations over a four month span from November 1636 to February 1637. This phenomenon had devastating effects on the Dutch economy and left many people in financial ruin.
At least that’s how the story is told.
But according to Anne Goldgar, Professor of Early Modern History at King’s College London and author of Tulipmania: Money, Honor, and Knowledge in the Dutch Golden Age, the popular story is mostly an exaggeration.
“We have heard how these bulbs changed hands hundreds of times in a single day, and how some bulbs, sold and resold for thousands of guilders, never even existed. Tulipmania is seen as an example of the gullibility of crowds and the dangers of financial speculation. But it wasn’t like that … not one of these stories is true.”
Goldgar uses extensive research to expose that, while there was a rise and crash of tulip prices, much of what we believe about the period is the product of historical exaggeration from a small number of writers.
What drove this? According to Goldgar, it was a product of societal anxieties triggered by the immense riches of the Dutch Golden Age. As Lorraine Boissoneault writes in Smithsonian Magazine’s recent piece on the book, “All the outlandish stories of economic ruin, of an innocent sailor thrown in prison for eating a tulip bulb, of chimney sweeps wading into the market in hopes of striking it rich — those come from propaganda pamphlets published by Dutch Calvinists worried that the tulip-propelled consumerism boom would lead to societal decay.”
English historian Simon Schama also writes of the period: “The prodigious quality of their [the Dutch] success went to their heads, but it also made them a bit queasy. Even their most uninhibited documents of self-congratulation are haunted by the threat of overvloed (abundance) … a word heavy with warning as well as euphoria.”
When looked at through the lens of this historic research, the legend of the tulip bubble becomes less about financial mania and more about the way that an economic memory can reflect a society’s collective mindset. The Dutch Golden Age represents a period during the 17th century when “Dutch trade, science, military, and art were among the most acclaimed in the world.”
This transformation was termed the “Dutch Miracle” by historian K.W. Swart. But, while it is easy to look back now and realize this era was a huge stepping stone to the modern prosperity the Dutch people enjoy today, at the time the progress was not as apparent. Many of the Dutch found a hard time adjusting to a society where fortunes were being created overnight. Schama compares the mindset to one which was found by de Tocqueville in 19th century America: “that strange melancholy which often haunts the inhabitants of democratic countries in the midst of their abundance, and the disgust at life which sometimes seizes upon them in the midst of calm and easy circumstances.”
While there was undoubtedly a run on Dutch Tulip prices, it seems there was an equal run on seizing the opportunity to find a negative aspect to extraordinary societal progress. Today, we are seeing the same mindset from cryptocurrency skeptics.
Cryptocurrency has arrived at an uncomfortable moment in history. There is a wide debate surrounding whether or not technology is hurting human progress. Many argue that smartphones are making kids depressed and robots are taking our jobs. The thought is that technology which was supposed to make life better is instead causing us to become stupid, antisocial and unhealthy. On top of this, the freedom of speech made possible by the internet is being questioned for the alleged harm it can cause to democracy.
It is in this atmosphere of negativity that critics have found their “tulip moment” in cryptocurrency. It is being latched onto as an lightning rod for these growing worries about a society that is becoming radically shaped by the digital age. Detractors consistently ignore any possible justification for cryptocurrency to be considered useful and instead focus on its most distasteful features:
Haha, I feel sorry for all you losers who missed out on the Bitcoin train. You should've bought in years ago, like me: A perfectly normal man who coincidentally hoarded a virtual currency during a time when it's only use was for sex trafficking and purchasing organs.
— Shane (@Shanehasabeard) December 8, 2017
Many cannot push their analysis past observations of price movements. Warren Buffett partner Charlie Munger has described the cryptocurrency scene as “total insanity” and recently told an audience at University of Michigan’s Ross School of Business, “I think it is perfectly asinine to even pause to think about them. It’s bad people, crazy bubble, bad idea, luring people into the concept of easy wealth without much insight or work.”
Others, echoing popular sentiment questioning unbridled freedom of speech, are worried about a lack of governmental oversight. Back in 2013 author Charlie Stross wrote in Why I Want Bitcoin to Die in a Fire that “Bitcoin looks like it was designed as a weapon intended to damage central banking and money-issuing banks, with a Libertarian political agenda in mind — to damage states’ ability to collect tax and monitor their citizens’ financial transactions … late-period capitalism may suck, but replacing it with Bitcoin would be like swapping out a hangnail for Fournier’s gangrene.”
Economist Paul Krugman cited the article in his piece Bitcoin Is Evil, adding “Stross doesn’t like that agenda, and neither do I.” While Krugman did admit he was open to conversation on the topic, fellow economist, Joseph Stiglitz, has been less forgiving. Recently he told Bloomberg “Bitcoin is successful only because of its potential for circumvention, lack of oversight…So it seems to me it ought to be outlawed … It doesn’t serve any socially useful function.”
The Progress Paradox
Are these arguments baseless? Not at all. Cryptocurrencies do in fact make many unsavory things possible. But, much like supporters believe bubbles are a necessary evil for price growth, they also believe that some illicit activities are a worthwhile trade-off for the ability to have a censorship-resistant, value-transfer system. They believe the win for personal freedom trumps all else.
It looks as if this idea is spreading. Bitcoin alone has grown from roughly 6,000 transactions per day in January of 2011 to 240,000 transactions on January 1, 2018. With 1000+ other cryptocurrencies, each growing their own communities, this desire for this financial independence appears contagious.
To the critics, these statistics do not matter. They will continue to focus on perceived faults. As the myth of the Tulip Bubble illustrates, this is rooted in human psychology. Some people are set on ignoring the progress around them.
De Tocqueville observed: “In America I saw the freest and most enlightened men placed in the happiest circumstances that the world affords; it seemed to me as if a cloud habitually hung upon their brow, and I thought them serious and almost sad, even in their pleasures.” Over the last few centuries, technology has made our lives less nasty, brutish and short. But, for some of us, the natural reaction has been to question whether it was really worth it.
Cryptocurrency now finds itself at the center of this larger debate over the morality of technology in a developing society. If supporters have their way, it holds the power to usher in a new era of human economic freedom. If critics have their way it will be regulated to death.
Let’s hope one side ends up as forgotten as Calvinist pamphlet writers.
This is a guest post by Kenny Spotz. Views expressed are his own and do not necessarily reflect those of Bitcoin Magazine or BTC Media.
This article originally appeared on Bitcoin Magazine.
Salesforce is working on a product based on blockchain and cryptocurrency, the cloud computing company’s CEO has revealed.
Japan’s financial regulator has ordered two cryptocurrency exchanges to halt operations for two months due to insufficient KYC procedures.
The province’s securities regulator is gathering information after receiving numerous complaints.